Run Your Business with Amazon Services

The most exciting about doing the project about Kiva Systems is that we continuously gain a deeper understanding of the global supply chain and even perceive insights in how the business will look like in the future.

This weeks reading shows us how the way doing business has changed with evolving technology. Despite what technology we are going to use, either 3D printer or RFID, the principle is, business is all about an idea. The global supply chain network and advanced technologies enable us to outsource business processes, including manufacturing, assembling and shipment to outsiders.

From a pure supply chain perspective, one of the most recent shifts has been in the transition form third party to fourth-party logistics providers. Kiva’s new owner, Amazon, is an outstanding fourth-party provider by all means. Amazon’s has more than 100 distribution centers globally, which makes it a strong competitor to FedEx or UPS. In 2006, Amazon Business Solutions launched “Fulfillment by Amazon”. It allows businesses to use Amazon’s own order fulfillment and post-order customer service infrastructure, and allows Amazon customers to receive the shipment directly by Amazon when buying from third-party sellers. A typical workflow is like this:

Step1: You send your products to Amazon

            You send your new or used products to Amazon’s fulfillment centers

Step2: Amazon stores your products

            Amazon catalogs and stores your products in their ready-to-ship inventory

Step3: Customers order your products

            Customers search for and purchase your products directly on Amazon.com, or on other e-commerce channels such as your own site

Step4: Amazon picks and packs your products

            Fulfillment by Amazon picks your products from inventory and packages them

Step5: Amazon ships your products and provides support

            Amazon ships products to customers from their network of fulfillment centers

During these steps, Amazon as a fourth-party provider provides value-added services including:

“Sell on Amazon” that let you sell your products on the Amazon Marketplace,

           “Amazon Payments” that let customers pay with their Amazon accounts

“Build a Website” that let you build a full-featured eCommerce web store

“Advertise on Amazon” that let to advertise on Amazon’s website

Amazon’s ecosystem made it possible for customers to focus on their products rather than manage the whole business process. However, there are still limitations of using Amazon service. In terms of cost, fulfillment by Amazon is not suitable for oversized products. The service fee charged by Amazon may consume customers’ profit margin. By contrast, the service fee charged for small size product is reasonable. In addition, the coverage of Amazon’s DCs may not be enough to be a cost-effective for its customers. The initial transportation of products from customer to Amazon’s DCs will become extra expense, which is not necessary especially when customers are far away from Amazon’s DCs.

As Amazon keeps expand and investing in its logistic network, as well as its value-adding services. We can foresee that Amazon service will be a good option for running business. And we’ll follow up to see what a role Kiva Systems will play in this process.

Sources:

[1] http://services.amazon.com/?ld=NSGoogleAS

[2] http://www.youtube.com/watch?feature=player_embedded&v=sK195ohi_fU&list=PLArA2Iv0CGQv9cXM7CUw60Jtle1WTLAq2